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Continental (CLR) Up 205.1% YTD: What's Behind the Rally?

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Shares of Continental Resources, Inc. (CLR - Free Report) have jumped 205.1% year to date (YTD). The Zacks Rank #1 (Strong Buy) stock, with a market cap of $18.3 billion, has witnessed a rise in Zacks Consensus Estimate for 2021 and 2022 earnings per share in the past 30 days.

Zacks Investment ResearchImage Source: Zacks Investment Research

Let’s delve deeper into the factors behind the stock’s price appreciation.

What’s Favoring the Stock?

West Texas Intermediate (WTI) crude price is trading above $77, highlighting a substantial improvement from the negative territory hit last April. Improving fuel demand on the massive rollout of coronavirus vaccines is aiding the rally in crude price.

The Organization of the Petroleum Exporting Countries (OPEC) and a Russia-led group of oil producers, jointly called OPEC+, said that it will increase its collective production by 400,000 barrels a day each month. Thus, the group has decided to stick to its previously-agreed plan of gradually returning production to the pre-pandemic level.

With oil price’s continued climb, most analysts expected more production increase from OPEC+. Instead, the group’s decision to continue to lift production in measured steps has primarily led WTI crude to trade at more than $78 a barrel for the first time since 2014. Being a leading oil producer in the prolific Bakken play of North Dakota and Montana, Continental is well placed to capitalize on the crude price rally.

The upstream firm has a strong focus on reducing well costs to aid its bottom line. The company is now on track to reduce its well costs in Bakken by more than 7% year over year in 2021. Compared to 2018, the company is planning to lower its drilling & completion costs per lateral foot in Bakken by 30% in 2021. With the reduction of expenses, the company is improving its capital efficiency.

Continental is being focused on shareholder value creation and returning capital to stockholders. The company has resumed its $1-billion share repurchase program initiated in the June quarter of 2019. Continental has also increased its quarterly dividend.

Other Stocks to Consider

Other players in the energy space include Whiting Petroleum Corporation (WLL - Free Report) , Comstock Resources, Inc. (CRK - Free Report) and Range Resources Corporation (RRC - Free Report) . While Whiting Petroleum carries a Zacks Rank #2 (Buy), Comstock and Range Resources sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Whiting Petroleum has witnessed upward earnings estimate revisions for 2021 in the past 30 days.

Comstock is expected to witness earnings growth of 378.3% in 2021.

Range Resources has seen upward earnings estimate revisions for 2021 in the past 30 days.